SMEs - a changing trend in SME failure

Guest post by: Dr. Rob Smorfitt
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SMEs and entrepreneurs in Africa - By Dr. Rob Smorfitt

I commented on another blog the other day about SME failure. I asked the question whether the failure rate of SMEs was up or down. Stefan replied that in the USA the failure rate of SMEs has in fact reduced. Does this apply to Africa or more specifically South Africa?

This is significant. However, other statistics I saw showed that 70% of SME's in the USA are one person businesses. These are baby boomers who legally go into retirement and then return to the economy as SMEs providing services back to their previous employers because of the skills shortage that the departure of baby boomers is contributing to. This trend is definitely occuring in South Africa. The massive skills shortage, which is compounded by the broad range of legislation geared to bring more black Africans into the economy without providing them the necessary skills to do so, is a direct contributor to this trend in South Africa. Government attempts to develop skills in South Africa have been a dismal failure. The apprenticeship system has all but collapsed, which has resulted in insufficient artisans in the country, together with the drive by developed countries to attract artisans to meet the demand created by their economic growth.

The restructuring of the tertiary education has lead to everyone attempting to compete with one another instead of each tier adding it's own unique value to the economy in respect of skills.

My question now is whether or not there is a trend developing whereby there are one person businesses which are highly sustainable due to their origins and source of business, and then a large gap before we see business in the 10 to 20+ employee range? Are we seeing this valley between the one person and the bigger SME growing?

I think perhaps we are, and I feel that the reason could be globalisation/Walmart effect, which leads to ever reducing prices.

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SMEs and entrepreneurs in Africa - By Dr. Rob Smorfitt

About the Author: Dr. Rob Smorfitt

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Have an MBA and a PhD in entrepreneurship. Three key areas of ongoing research are entrepreneurship and innovation in large business strategy, the impact of legislation on SME development and SME finance. Run my own SME blog at http://sme-smb-smme.blogspot.com as well as an entrepreneurship and innovation for large businesses blog at http://innoveur.blogspot.com. I have been self-employed since 1982. I have started or purchased in excess of 50 businesses since then. Most were sold again and a few were shut down because of a lack of profitability. Many were run by staff or family while I worked full time in my bigger businesses. Author of 6 books. Written articles for various magazines, newspapers and websites. Experienced in research within developing countries.
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SMEs - a changing trend in SME failure

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